Dutch Dividend Engineer

American States Water Company (AWR) Stock Analysis Pollie Style

Here my second analysis for Polliesdividend. I’ve been less active around my blog lately. Not that I’ve lost interest in it. Far from it. The last weeks have been pretty crazy with work and in my private life. But don’t worry I have plenty of ideas to talk about and stock to invest. Now I only need a little bit of free time 😉

This analysis is on American States Water Company (AWR).

Company (from google finance): American States Water Company (AWR), is the parent company of Golden State Water Company (GSWC) and American States Utility Services, Inc. (ASUS) and its subsidiaries (Fort Bliss Water Services Company (FBWS), Terrapin Utility Services, Inc. (TUS), Old Dominion Utility Services, Inc. (ODUS), Palmetto State Utility Services, Inc. (PSUS) and Old North Utility Services, Inc. (ONUS)). AWR operates in three segments: water, electric and contracted services. Within the segments, AWR has two principal business units, water and electric service utility operations, conducted through GSWC, and contracted services conducted through ASUS and its subsidiaries. GSWC is a California public utility company engaged principally in the purchase, production and distribution of water in 75 communities in 10 counties in the State of California.

Dividend Aristocrat: American States Water Co. is paying Dividend for 60 years in a row! And is a Dividend Champion. It’s number 2 on the CCC-list form David Fish! Duh! That’s a Passed!

Dividend Yield > 2.5%: The dividend Yield of AWR is 2,81%. It’s way above the industry average of 1.8%. AWR has a healthy dividend that can offer investors higher returns if they choose to reinvest it. American States Water Co. passed the second Pollie-code.

Dividend payout <70%: The current dividend is $0.85 and AWR has an earnings projection of $ 1.47. The dividend payout is roughly 55%. This is way below the maximum ratio. So also passed for this point.

DGR 1 year > 0%: The dividend growth rate for 1, 3, 5 en 10 years are 19.7, 13.5, 8.7 and 5.6. This negative trend is makes my eyebrow twitch. This is not what I like to see. I haven’t found a good explanation for this decline. If you know the reason, please let me know. For this moment it is a fail for AWR on the fourth Pollie-code.

P/E-ratio < 15: This is an easy metric that is well documented. It can be used as a quick metric to identify stocks that may potentially be undervalued. I use this to identify stocks that may be discounted compared to the overall stock market. The industry average is 15.5. AWR has a current P/E ratio is 20.1. This is another fail on the Pollie-code.

EPS > 0: The EPS is 1.60. So AWR also passed the sixth Pollie-Code

ROE > 10%: Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested. The current ROE is 13.1%. Another passed.

Market Cap. > 100M: No problem at this point. More than 1.174 $Mil. Another passed.

Chowder Rule > 12: Named after “Seeking Alpha” member Chowder. This is a method of identifying candidates for purchase based on a combination of yield and (5-year) dividend growth rate. When the sum of these elements is above 12%, the company
presents an attractive entry point (8% for utilities). When the figure is above 8%, an existing holding is still considered worthy of being retained. The current Chowder rule is 11.5. So AWR, as a utility stock, also passed the ninth Pollie-code.

Stock price 52wk high-25%: The 52 wk high and low are: 34.00 and 25.07. This means that AWR will be in my buying zone when the stock price is below 31.77 ((34.00-25.07)*0,75 + 25.07).

Beta: I think it’s important to have low Beta stocks in my portfolio. This helps to have a stable income all the time, even when the market has a rapid decline. The Beta for AWR is 0.68.

Conclusion: When I look at the analysis, AWR passed 8 out of 10 from the Pollie-code. The Pollie-code that failed was the P/E-ratio and the DGR. Considering all the data AWR at this moment is not a buy for me. The biggest problem is the decline in DGR. It is a great stock but not suitable for a buy for me (yet).

What are you – the readers, thoughts on American States Water Company? Is it a buy? Do you know why there is a decline in DGR?
Please comment on my analysis and thanks for stopping by!

10 thoughts on “American States Water Company (AWR) Stock Analysis Pollie Style”

Thanks for sharing your Pollie method of selecting dividend stocks. AWR and WTR have been in the back of my mind for a long time. I know water utilities have a nice long history of dividend payments and I recently a blog post titled “Dividend Stocks To Quench Your Thirst” http://divhut.com/2014/06/dividend-stocks-quench-thirst/ focusing on many water services/infrastructure companies. Timely post!

Thanks for your comment and your kind words.
I read your post last week and i agree with you about the importance. Nice post!
Water usage is definitely going to be critical going forward as the population continues to grow and the resources becoming scarce.

Pollie,
Regarding the dividend increases, NASDAQ shows a slow increase from $0.217 in August, 2002 to $0.28 in May, 2012 (approximately 3% per year). Then there was a large increase in August, 2012 to $.355 (26.8%) and again in August, 2013 to $0.405 (14%). The stock split 2 for 1 after that and was raised again for August, 2014 to what in effect would be $0.426 (5.2%) before split ($0.213 times 2). The increases in 2012 and 2013 are anomalies in the pattern of increases which otherwise tend to be slow and steady.

I can’t answer your question as to why the dividend increases were greater the last couple of years than before because I don’t follow the company. If you use the 3% DGR that held for the 10 years prior, the Chowder rule is less than 6 and fails.
Good luck!
KeithX

I just added AWR to my watch list. I really love the low volatility here, during 07-09 it basically traded sideways! The dividend yield is over 2.5 % which is good for me and the dividend growth has been fantastic for the past couple years, growing 26% in 2012 and 14% in 2013. It doesn’t look like this growth will continue but the next announced dividend increase is around 5% which is still very high for a utility.

Thanks for your reaction! AWR is a great stock and still on my watchlist. I agree with you that a low beta is great and AWR did great during 07-09. That the dividend probably will not increase gives something to think about. But all with all its a good stock to keep in mind.
Let me know when you buy AWR.
Cheers,
Pollie

David,
Thanks for stopping by and your comment. I really apreciate it!
The 25%: like everyone else I don’t want to pay the top prize. So from experience I came up eith the 25%. It works for me. But i must say that this is one of the codes which sometimes I don’t always use 😉
Cheers,
Pollie

Pollie

I’m a 40-something old guy from The Netherlands, aka Pollie.
I have a family with two little kids, a day job, a house with a garden and this blog to keep me busy. So not much different from you; an investor with a busy life with limited time to trade.
I want to share my journey to hopefully inspire others and also to track my progress towards my ultimate goal of financial independence.
Pollie@polliesdividend.com